Oil hits 3-month high as Wall Street rallies

By IBT Staff Reporter On 03/23/09 AT 3:40 PM

Oil prices hit their highest level in nearly three months on Monday as a U.S. plan to purge banks of toxic assets triggered a rally on Wall Street and brightened the outlook for flagging energy demand.

U.S. crude rose $1.73 to settle at $53.80 a barrel, having earlier climbed to $54.05, its highest price since December 1. London Brent crude rose $2.25 to $53.47.

The U.S. government said it would offer financing for investors to unburden banks of up to $1 trillion in soured assets stifling the economy, sending Wall Street up around 5 percent Monday. Stocks also received support from data showing U.S. existing home sales rose in February.

Dealers said the bank plan could brighten the outlook for global business and consumer energy demand, which has been shrinking for the first time in a quarter century.

The rise in the stock market points to improved (oil) demand, said Christopher Bellew, oil broker at Bache Commodities in London.

An oil strike in Brazil encouraged crude's gains, dealers said. Workers at Brazilian energy company Petrobras began a five-day strike on Sunday in a protest over job cuts, pay and conditions, a union leader said. By Monday afternoon, one Brazilian oil platform had been shut as a result of the strike.

A similar strike in July in South America's second-largest oil producer had no material effect on production.

U.S. crude oil has climbed from below $33 last December due in part to aggressive supply cuts from the Organization of the Petroleum Exporting Countries. But prices remain almost $100 below last summer's peak as the global economic crash erodes consumption.

The global economy is set to shrink 1 to 2 percent this year, World Bank President Robert Zoellick said on Saturday. He said the depth of the slowdown was unprecedented since the 1930s Great Depression.

Signs of higher demand in China, the world's second-largest consumer, could also lend support. China's implied oil demand climbed 0.5 percent in February after three months of declines, Reuters calculations from official data showed.

(Additional reporting by Alex Lawler and Christopher Johnson in London and Fayen Wong in Perth; Editing by David Gregorio)